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Study: Private-land gas drilling on rise

An industry association and two conservation-oriented groups are differing on the reasons why domestic oil and gas production has increased overall even while falling on federal lands.

The Western Energy Alliance says the difference is due to regulatory red tape for federal-land drilling.

But a new report by the Center for Western Priorities suggests geology and economics are the reasons. Just like legend has Willie Sutton saying he robbed banks because “that’s where the money is,” the report contends energy companies are targeting private lands because that’s where the oil is.

The organization’s new analysis says a private-land drilling trend has been driven by the fall in natural gas prices and rise in oil prices.The natural gas price decline has resulted from companies’ successful development of shale formation for gas, and now companies are focusing on producing oil from shale formations, the analysis said.

The analysis found that 93 percent of all onshore shale oil and mixed oil and gas shale “plays” — essentially, known resource areas — are on nonfederal lands. Even for just the West, with more federal lands, that figure is 89 percent, it said.

Report author Greg Zimmerman said the findings stand in stark contrast to arguments that federal regulations are to blame.“It’s simple economics.”

He noted that companies such as Bill Barrett Corp., which last year suspended its drilling for natural gas in the Piceance Basin, are now concentrating on oil. Both private- and public-land drilling in the gas-rich, oil-lean Piceance have declined due to low gas prices.

Responding to the analysis, Western Energy Alliance’s Kathleen Sgamma said, “We are indeed lucky that significant oil plays like the Bakken in North Dakota and the Niobrara in Colorado and Wyoming are largely on non-federal lands. Otherwise, we’d be in year six or seven of federal environmental analysis, rather than on the path to energy independence with record-low unemployment levels in production areas.”

On Feb. 28, the Congressional Research Service reported that natural gas production since 2007 grew 40 percent on nonfederal lands while falling 33 percent on onshore and offshore federal lands. While total oil production grew, it was thanks mostly to private-land drilling. Federal onshore oil production grew marginally, but total federal-land production fell when offshore drilling is included.

Citing that report, Sgamma said increased oil and gas production “has come in spite of, not because of, the federal government.”

But Ellynne O’Bannon of the Checks and Balances Project said the Congressional Research Service report actually refutes such claims. While noting the interest of some in Congress in opening more federal lands for drilling and speeding permitting processes, that report says, “But having more lands accessible may not translate into higher levels of production on federal lands, as industry seeks out the most promising prospects and highest returns.”

Looking forward, it adds, “Any increase in production of natural gas on federal lands is likely to be easily outpaced by increases on non-federal lands, particularly because shale plays are primarily situated on nonfederal lands and (that) is where most of the growth in production is projected to occur.”